4.12.2011

Using Savings to Pay Off Debt

Hubby and I have been hard at work paying off our credit card debt for a while now, and most seriously since January of this year.  You can read all about it here.

We started the year off with $13,402.24 in credit card debt on our three major credit cards.  In January and February, we managed to pay off $1,531.54 of that debt.  We were lucky to have extra money at the time to knock out that big chunk of debt and really get us moving in the right direction.

Then March came along and we really wanted to keep going with the same momentum.  But we didn't have the extra funds to put towards it.  We used our tax refund to pad our savings and to pay off a few balances on store cards. 

It felt good to do those things and eliminate some of our monthly bills. But it still left us wanting more.  We wanted to pay off more.  We wanted to eliminate more of our monthly bills, cut more of our debt, and we wanted to lessen the amount we were wasting on interest fees.

So we came up with a plan.  Probably one of the best plans we've had.  And it will save us a good amount of money in the long run.

We ended up using our savings and the sale of some stock to pay off one of our credit cards - the CitiCard that had a $3,573.25 balance at 0%. 

If you've been following along, you might remember that we had planned on paying off this card last since it had 0% interest for another year.  We had wanted to pay off the Chase card first since it had the higher interest rate.  Well, we changed our minds.

We decided to pay off the CitiCard using our savings because that card had the lowest balance and by eliminating that, we could easily eliminate an entire monthly bill.  Freeing up more money to pay off the Chase card with the higher balance of $8,464.49.

You following?  I know it gets confusing. (Another reason to avoid credit card debt!)

Anyway, the other benefit to paying off the CitiCard first was that it would free up that card and it's 0% balance transfer offer that was still available for another year.

Then we transferred part of the Chase balance onto the CitiCard,  up to it's credit limit.  It cost us 3% in balance transfer fees, but we're still easily savings hundreds of dollars in interest fees, since the CitiCard is 0% for another year. 

Next we were left with the remaining balance on the Chase that we wanted to get rid of.  We didn't want to continue wasting money on interest fees.  So Hubby applied for his own CitiCard and received a 0% balance transfer offer for 18 months.  So we transferred more of the Chase balance onto that.  Again, we paid the 3% balance transfer fee, but again, it was well worth it with the savings of not paying interest for 18 months.

Then we paid off the remaining balance on the Chase and it's so completely exhilarating to see that $0 balance on that card that was over $15,000 not that long ago.  Yea, we now have the two CitiCards to pay off, but with 0% interest, all of our payments will go to reducing those balances and they'll be paid off much, much, MUCH quicker.

Still with me here?  I know, it's probably boring you to tears, but for me, it's super exciting.  Because we're taking charge of our finances.  We're not just sitting down and accepting high interest rates (or any interest!).  We've taken actions to put ourselves in a much better position to pay off our debts. 

Now our goal is to restock our savings account, which we greatly depleted.  Then we'll work on paying off my CitiCard, which we'll call CitiCard1, first since that 0% rate is for a year and the CitiCard2 0% rate is for 18 months.  Coming up next, I'll post the recap from March, which will show all the progress me made last month!